Samsung profit reaches three-year high despite Note 7 recall

Samsung Electronics posted profits that beat estimates as buoyant memory chip prices helped the world's largest smartphone maker bounce back from the death of its fire-prone Galaxy Note 7.

Operating income rose 50 per cent to 9.2 trillion won (€7.3 billion) in the quarter ended December, its biggest profit in three years, the South Korea-based company said in preliminary results Friday.

A persistent rise in chip prices spurred by Chinese demand and growth in displays using organic light-emitting diodes (OLEDs) mitigated the fallout from Samsung's biggest corporate crisis, when incendiary Note 7s forced the Korean company to kill off the gadget. It still hasn't revealed the results of a subsequent investigation into an episode that cost Samsung more than $6 billion and assured Apple of the lead in premium devices.

“It came in as a big surprise,” said Greg Roh, an analyst at HMC Investment Securities. “The biggest contributors are of course the memory chip business and OLED sales. The chip prices will continue to rally and may rise more than 30 per cent in the first quarter alone on sustained supply shortage.”

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Shares up

Shares of Samsung rose 2 per cent to 1,813,000 won as of 9.01am in Seoul. The stock surged 43 per cent in 2016, after three straight annual declines. Samsung, which settles most component sales in US dollars, also got a lift from a weaker Korean won. The US dollar appreciated to 1,157.4 on average in the fourth quarter compared with 1,121.4 won in the previous three months, according to Bank of Korea data.

Samsung is counting on its flagship Galaxy S line this year to repair its image and fire up a beleaguered mobile division. The next iteration of the phone is said to feature a bezel-less display and voice-enabled digital assistant. But the company also warned of slowing key markets and growing uncertainty around trade protectionism and currency fluctuations.

Sales were 53 trillion won in the quarter, the company said, compared with the 52.1 trillion won analysts expected. It won’t provide net income or break out divisional performance until it releases final results later this month.

Samsung’s semiconductor division was probably its best performer in the fourth quarter on the back of stronger prices, lifting its shares to new highs in the past weeks despite the company’s challenges. – (Bloomberg)